John Pitera's Market Laboratory Message Board

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Strategies & Market Trends : John Pitera's Market Laboratory

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To: John Pitera who wrote (3640)	3/30/2001 11:07:43 PM
From: Chip McVickar	Read Replies (1) of 33421

John, We could easily be looking at years of complications before these markets can reach new highs. Maybe that's why the Fed sent out it's foot runners all over the country this week, they already see a significant contraction in investment spending. Wonder if they will abandon the dollar and lower rates early and unexpectedly...? This was one of the best paragraphs: "Brett D. Fromson: Telecom services and equipment have been two of the fastest-growing sectors of the economy in recent years. What does it mean to the overall economy that they are contracting? Ravi Suria: This economic cycle has been driven by investment spending. If you look at GDP (definition \| chart \| source) growth, investment growth has been greater than consumer spending growth. Government spending has been going down. And we have been running a trade deficit. So most of the demand has been spurred by investment spending. Now, you slow that down. What you could see in the next few years is a sharp falloff in investment spending. It's hard to say that companies won't be spending more on technology. But I think we went through a substantial upgrade cycle over the past five years, and unfortunately cash flow growth, which at the end of the day actually gives you the ability to spend more, has not substantially improved for corporate America. I do not know how much of a crimp it will put on economic growth, but I would say that if you think that investment spending is going to fall off a cliff, you could make an argument for lower GDP growth more closely linked to the growth in consumer spending. And that would not be a four-quarter phenomenon. It would be a phenomenon until debt leverage across the board starts coming down."

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